All Forum Posts by: Ryan Mancuso

Hi Kristi,

As an agent who has worked with FSBO owners on both sides of a transaction, my main question is what is the reason you want to go this route? The data shows that FSBO houses take longer to sell and sell for less (or what you really care about - net less) than using an agent. The main argument FSBO's offer is not wanting to pay a commission, but realtors (usually) make it worth the upfront cost. THe bottom line once it has sold should be what is important.

All that being said, if you have done a lot of transactions and feel comfortable pricing it, staging it, showing it, etc, then it could be a good way to save some money.

Also, most title companies can do the paperwork, OR a buyer's agent that would have access to the state specific forms can do the contract and addenda for you.

You should at least expect to pay a buyer's agent to incentivize them to show your property. But with a FSBO, it is not on the MLS and can be overlooked by buyers.

With such a big transaction, it helps a lot having a professional on your side, advocating for you to make sure you don't miss something that could ruin your bottom line.

Good luck!

 Yes, asking the county what you can do as far as what you can do on the land is important as well. As far as the well situation, I would be wary of that. Who pays for maintenance? Who collects the money? How is it metered?

@Lee Johnson

I admire your ambition!

I have developed for the last few years and what I have found is that lenders care about securing the asset (the leverage in case you default). They care about the GC, but are mainly concerned with how you will pay for the project. What will rents be? How are you funding the construction? You would proabably need at least 25% if not more down to get the loan. Hard money lenders will care about those same things too. No one wants to re-po an asset and sell it, especially a bigger project like this where the buyer pool is limited. Having a GC is a good step, but you need to do your due dilience when selecting one. Not just the one who will build for the chepaest price (there is usually a reason).

• Once you get beyond 4 units, you are looking at commerical lending. The interest is higher and the money needed is more. I would consider building something where all of the units are the same size. That would make for an easier first project rather than having 9 units - 3 1 bed 3 2 bed and 3 3 bed. The plans cost more, and there is a higher margin for error.

You can possible give the GC or your partners some equity if you will sell or a combination of equity and profit from rent in exchange for a reduced contractors fee. This is where trust is so important.

Maybe start a bit smaller and then you can scale as you learn!

Great Question! I have purchased built and sold several homes/duplexes in the Prescott/Prescott Valley, AZ area. Each county and city will have its own rules, but the main things to consider are the building expenses beyond just the house itself. Where will you get water? Septic? Utility hook ups? How much will excavation cost? I have had a flat peice of land where we needed to bring in dirt because the soil wasn't good (this is where you would get a soils report from an engineer). How will you get plans drawn up? Will you build a pad for the foundation or use stem walls? Also, getting a survey to make sure there are no easements (places you wouldn't be able to use the land).

There is a lot that goes into it but the more you do it, the smoother the process will be!

@Jeremy Santy Great Question.

I am in a similar predicament. I am not a CPA, but I am a licensed agent and I buy land, build a duplex and then sell them in AZ. Though not all projects are home runs, they have been an incredible learning experience for my partner (the builder) and I.

I have spoken with a 1031 exchange mediator and she confirmed what others in this thread have said. The intent is the most important part of the exchange. Usually timelines are around 3 years to hold it.

Have you thought of doing a refi once you're done, renting it and then re-using that money for another project? That money is (to my understanding) non-taxable and then you can rent it, depreciate it and then sell it later when the capital gains hit is lower (long term rather than short term)

What I have chosen to do is build and sell through my LLC for these projects. I save on commissions because I am an agent, but I pay the taxes upfront, but that way, my cash is liquid and my overall tax hit is a lot lower than if I had a w2 job.

Everyone has a different reason they do things, but hopefully you can pick up some ideas! And I would love to learn if there are other ideas I have not considered.

@Jeremy Santy Great Question.

I am in a similar predicament. I am not a CPA, but I am a licensed agent and I buy land, build a duplex and then sell them in AZ. Though not all projects are home runs, they have been an incredible learning experience for my partner (the builder) and I.

I have spoken with a 1031 exchange mediator and she confirmed what others in this thread have said. The intent is the most important part of the exchange. Usually timelines are around 3 years to hold it.

Have you thought of doing a refi once you're done, renting it and then re-using that money for another project? That money is (to my understanding) non-taxable and then you can rent it, depreciate it and then sell it later when the capital gains hit is lower (long term rather than short term)

What I have chosen to do is build and sell through my LLC for these projects. I save on commissions becauase I am an agent, but I pay the taxes upfront, but that way, my cash is liquid and my overall tax hit is a lot lower than if I had a w2 job.

Everyone has a different reason they do things, but hopefully you can pick up some ideas! And I would love to learn if there are other ideas I have not considered.

First of all, only you truly know how sincere (or not) this tenant is about turning over a new leaf. I would ask why the circumstance has changed? How is she now able to pay a month in advance if she can't pay late fees? I would probe with those questions.

The essence that you want to get to is "HOW can we remediate the past while moving forward?"

I agree that it would be cheaper and easier (though not fair) to pay it and move on. The title/escrow company is supposed to do some digging into the HOA and the viability of it, as well as the ledner(they really care about how much in reserves an HOA has and if it's looking bleak, they will nto finance the loan).

I have a friend who is the treasurer of a small HOA here in Prescott that had to give a special assessment for raod repaving and the title compnay did not find it. It's part of everyone's job (agent, title company, lender etc) to know to ask these kinds of questions since it is not something you would know to ask. Not that anyone is fully at fault.

I'm so sorry this happened to you.

Steve made some great suggestions, and I'll add another one. I am not a CPA, but 

The Win-Win Wealth Strategy by Tom Wheelwright is a great book that shows you how to lower your taxes. Buying an investment property and doing a cost segregation analysis could save you A LOT of money, and it's detailed in this book. This might be a great time to get into investing to help offset some of those tax liabilities and build for the future. Of course, consult a good local, investor friendly CPA who can go into depth with you about this.

Hi Nevena,

I am in Prescott, not Phoenix, but I have been to a few meetups in Prescott for AZREIA.

If you are in the Phoenix area, it is defintely worth it for the connections alone, not to mention potential deals you could get. https://azreia.org/

Thank you for sharing this! I work in Sedona area as well as the Prescott area and this is helpful for my clients to know!